Gammell reveals succession plan for WesTrac

The managing director of
Kerry Stokes
’s private investment company has assured investors about its relationship with US mining and industrial equipment giant Caterpillar, ­revealing the two have negotiated an extensive succession plan for the business that includes Mr Stokes’s son Ryan.

Peter Gammell
, the managing director of Australian Capital Equity (ACE), said Caterpillar had negotiated the arrangement many years ago with Mr Stokes’s WesTrac, which sells Caterpillar equipment in Western Australia, NSW, the ACT and north-east China.

“The contract is a dealer-principal relationship and Caterpillar has a succession plan that goes down our organisation so to speak. Kerry, myself, [WesTrac chief executive]
Jim Walker
, Ryan and even the head of our divisions are part of that process,’’ Mr Gammell told The Australian ­Financial Review.

“It is a mutual thing –we would want to do it anyway, but they are very keen to know how the longevity of their relationship is going to be maintained.’’

Mr Stokes last week proposed a radical restructuring of his business interests through the $3.4 billion merger of his Seven Network media companies with WesTrac to form a new company, Seven Group Holdings. But some investors were concerned that Caterpillar has the right to terminate its agreement with WesTrac with only 90 days notice.

However, the average licence term around the world is 50 years and it is understood succession planning is a condition of the licence.

Mr Stokes has twice been a beneficiary of moves by Caterpillar to terminate dealerships.

In 1989, Caterpillar demanded former high-flying entrepreneur Alan Bond sell the WA franchise for the group or it would be withdrawn. Mr Bond subsequently sold to private American interests, who later sold to Mr Stokes.

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Then in 2002, NSW franchisees Gough and Gilmour had their agreement terminated in favour of a new deal with ACE.

Asked if the proposed restructuring of Mr Stokes’s empire was part of succession planning for Ryan Stokes to take over from his father, Mr Gammell said: “Not in that sense."

Ryan Stokes
is a director of
Seven Network
and serves alongsideMr Gammell as one of the network’s representatives on the board of Consolidated Media Holdings.

Mr Gammell described Ryan Stokes as “a very capable executive".

“He is doing an excellent job, he has had experience in a number of parts of the business. He’s been involved with WesTrac and the China business. Right now he’s doing a lot with Vivid Wireless and that launch. I have high hopes for him," he said.

Perth-based Mr Gammell is expected to return to Sydney and Melbourne this week for more briefings with investors on the merger deal.

Seven’s biggest institutional investors, Ausbil Dexia and Perennial Value, together hold 12.5 per cent of the shares and have the potential to block the deal. Seven deputy chairman
Peter Ritchie
revealed last week that both were sceptical about the transaction in initial briefings, but he was confident their support could be secured.

Seven shares closed 15¢ higher on Friday at $7.34 and have risen 5 per cent since falling heavily last Monday in the initial reaction to the deal.

Despite investors expressing some concerns last week about the conglomerate nature of the new company,Mr Gammell said none he had spoken to had seen it that way.

“Nobody has called it a conglomerate at all. They have said it is two separate businesses, so we will have to evaluate it from that point of view. Some have said would WesTrac not be better on its own? We’ve said our view is the answer is no," he said.

“There is an equality of earnings to this that is not always that when media is up, mining is up. They work on different cycles. And so from our perspective, if you look at it from a long-term predictable growth in earnings, I think there is that protection. Certainly we have enjoyed that for the past 20 years."